We thank Yonatan Levav for his help with data collection (and for helping us realize that some options are better when they are gone) and to Shane Frederick, Duncan Semester and Jim Bettman for their insightful comments. Correspondence: MIT, 38 Memorial Dr. E56-329 Cambridge MA 02142; Email jishin@mit.edu or ariely@mit.edu AbstractDecision makers must often expand efforts to preserve the future viability of current options. Do decision makers sometimes value such options more highly than the outcomes they make possible? In five experiments using a "door game," we demonstrate that decision makers care a great deal about options and are willing to invest effort and money in order to keep options open, even when the options themselves seem to be of little interest. This general decision rule of keeping options viable is shown to be resilient to information about the outcomes, to increased experience, to the cost of the options, and to the saliency of the cost and of the option elimination. Experiment 5 provides initial evidence that the mechanism underlying the tendency to keep doors open is a type of loss aversion and not regret.

This study attempts to answer a basic customer management dilemma facing firms: when should the firm use behavior-based pricing (BBP) to discriminate between its own and competitors' customers in a competitive market? If BBP is profitable, when should the firm offer a lower price to its own customers rather than to the competitor's customers? This analysis considers two features of customer behavior up to now ignored in BBP literature: heterogeneity in customer value and changing preference (i.e., customer preferences are correlated but not fixed over time). In a model where both consumers and competing firms are forward-looking, we identify conditions when it is optimal to reward the firm's own or competitor's customers and when BBP increases or decreases profits. To the best of our knowledge, we are the first to identify conditions in which (1) it is optimal to reward one's own customers under symmetric competition and (2) BBP can increase profits with fully strategic and forward-looking consumers.behavior-based pricing, customer heterogeneity, stochastic preferences, forward-looking customers, forward-looking firms, customer relationship management, competitive strategy, game theory

W hat the firm should say in an advertising message, the choice of content, is a critical managerial decision. Here, we focus on a particular aspect of the advertising content choice: an attribute-focused appeal versus an appeal with no direct information on product attributes. We make two assumptions that capture the reality of the advertising context. First, we assume that the bandwidth of advertising is limited: a firm can only communicate about a limited number of attributes. Second, we assume that consumers are active: they can choose to engage in a costly search to obtain additional product-related information. In this setting, we show that there exists an equilibrium where the high-quality firm chooses to produce messages devoid of any attribute information in order to invite the consumer to engage in search, which is likely to uncover positive information about the product. Whereas most of the previous literature has focused on the decision to advertise as a signal of quality, we show that message content, coupled with consumer search, can also serve as a credible signal of quality. In an extension, we show that our results are robust to endogenizing the firm's decision on the amount of advertising spending.

Digital advertising markets are growing and attracting increased scrutiny. This article explores four market inefficiencies that remain poorly understood: ad effect measurement, frictions between and within advertising channel members, ad blocking, and ad fraud. Although these topics are not unique to digital advertising, each manifests in unique ways in markets for digital ads. The authors identify relevant findings in the academic literature, recent developments in practice, and promising topics for future research.

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